Making Tax Digital for Income Tax 2026
Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is the biggest change to personal tax reporting in decades. Here's what you need to know.
Timeline
| Date | Who's Affected |
|---|---|
| April 2026 | Income over £50,000 |
| April 2027 | Income over £30,000 |
| April 2028 | Income over £20,000 |
| TBC | General partnerships |
Who Must Comply?
MTD ITSA applies to:
- Self-employed individuals
- Landlords with rental income
- Above the relevant income threshold
Income means gross income from self-employment and/or property before expenses.
What's Required?
1. Digital Record Keeping
Keep records using MTD-compatible software. Records must include:
- Income transactions
- Expense transactions
- Supporting documents
2. Quarterly Updates
Submit income and expense summaries to HMRC every quarter:
| Quarter | Submission Deadline |
|---|---|
| Apr - Jun | 7 August |
| Jul - Sep | 7 November |
| Oct - Dec | 7 February |
| Jan - Mar | 7 May |
3. Final Declaration
Replace the Self Assessment tax return with a Final Declaration by 31 January following the tax year.
MTD-Compatible Software
You'll need software that can:
- Store digital records
- Submit quarterly updates via API
- Submit Final Declaration
HMRC maintains a list of compatible software. Options include:
- FreeAgent
- QuickBooks
- Xero
- Sage
- HMRC's own free software (basic version)
Penalties Under MTD
The new penalty system applies:
Late Submission
Points-based system:
- Each late submission = 1 point
- At threshold (4 points for quarterly): £200 penalty
- Points expire after 24 months of compliance
Late Payment
Percentage penalties:
- 15-30 days late: Calculated daily
- 30+ days: Additional percentage
- Interest on all late payments
How to Prepare
- Check your income - Are you above the threshold?
- Choose software - Select MTD-compatible option
- Sign up - Register for MTD with HMRC
- Digitise records - Move from paper/spreadsheets
- Practice - Submit test quarterly updates
Exemptions
You may be exempt if:
- Digitally excluded (religious or practical reasons)
- Income below thresholds
- Already using other digital systems (e.g., VAT MTD)
Related Calculators
- Self-Employed Tax Calculator - Calculate your tax
- Rental Income Calculator - Landlord tax